Apex Irrigation Vs ITO (ITAT Rajkot)
Receipt, Not Accrual – Duty Drawback Timing Issue Fixed- : Tribunal Accepts Consistent Cash Accounting Method
Duty Drawback Addition Deleted; Cash Basis Method Upheld
Assessee, a partnership firm engaged in manufacturing plastic products, filed ROI for AY 2018-19 declaring Rs.5,60,289. The case was selected for scrutiny to examine duty drawback & ICDS compliance. As per ITS data, total duty drawback sanctioned was Rs.15,70,775, whereas Assessee offered only Rs.10,73,593. AO added the difference of Rs.4,97,182 as income from other sources on the ground that drawback is taxable on accrual basis. CIT(A) upheld the addition.
Before Tribunal, Assessee explained that it consistently followed the cash basis method for recognising duty drawback due to uncertainty in actual receipt, & submitted ledger extracts & sample shipping bills evidencing that only Rs.10,73,593 was actually received during AY 2018-19. Tribunal observed that Assessee had been consistently following this accounting method from inception, there was no revenue loss, & the difference arose only because of timing of receipt.
Tribunal relied on Bombay High Court in CIT Vs Matchwell Electricals (2002) & CIT Vs Citibank N.A. (SC) holding that export duty drawback can be assessed on receipt basis. Applying consistency & prudence, Tribunal held the method adopted by Assessee to be fair & reasonable. Accordingly, Tribunal deleted the addition of Rs.4,97,182 & allowed the appeal. Delay of 40 days in filing appeal was condoned.
